The fiscal year 2020-21 has thrown in some unsurprising trends given the fact that right at the beginning of the FY 2020-21, the economies around the world including India, dived deep into a slumber impacted by the coronavirus and the lockdown. It has also compelled Insurers to make, evaluate changes to their approach to growing and servicing the business. Not only them, but the regulators have had to support changes on a pro-active basis.

Let us see what the year has been so far (data till Nov. 2020)– Overall Business

 Few observations from the above data:

1. Apparently, assets insured through Fire Insurance have shown a healthy growth rate. However, this needs to be tempered with the fact that from Jan 2020, IRDA all but brought the tariff regime back, meaning that the discounts that were earlier being given with gusto by the Insurers, are now no longer there and that has accounted for a serious increase in premiums. Just to give a sense of things - there have been a lot of assets that were being insured with a 95% discount or earlier.

2. Motor premium collections went down as well – has taken a hit by the lockdown.

3. Marine / Transit Insurance going down by 15%.

4. It is Health Insurance that has shown good “health” and notched up an increase in premium collections by 13.47%.  Not surprising that in the year of the pandemic, the awareness of/about Health Insurance went up and contributed to this growth.

5. But overall, the premium from segments that dynamically represent India’s economic activities have gone down in tandem with the reduction in economic activities, and the premium collections have shown a -0.05% degrowth for the corresponding period in 2019-20.

Health Insurance data

Health insurance, unsurprisingly, has grown at a very healthy clip in the retail segment. Group Health Insurance has also witnessed a situation where the premiums have gone up and the extent of cover especially for smaller organisations has got tightened up. Many companies are imposing a waiting period for small organisations. 

In terms of claims, on average, a typical Covid treatment has cost around Rs 3 - 4 Lakhs in most parts of India.  There are of course outliers of claims that have happened. But for the most, the harsh reality is that diseases can visit us, at the wrong time and leave us with a big impact that we could do very well without.

Health insurance, unsurprisingly, has grown at a very healthy clip in the retail segment. Group Health Insurance has also witnessed a situation where the premiums have gone up and the extent of cover especially for smaller organisations has got tightened up.

The other insurance that got some additional traction has been Trade Credit Insurance. It has gained traction on account of an increased possibility of insolvency and bankruptcy on the part of buyers who are based abroad.

Another feature that came to the fore was the relative pro-active stance of the Insurance Regulator, IRDAI as they launched Uniform products through Insurers – “Corona Kavachh” and “Corona Rakshak” policies. The former policy is an Indemnity policy while the latter one is a benefit plan. A unique feature of these two policies being that the products having been designed by IRDAI, is uniform in respect of Terms and conditions. No insurer can alter these. Only the premiums are to be fixed by individual Insurers.

The other relative pro-active step was enabling certain elements of freedom and flexibility to the individuals in renewing / premium payment in respect of Vehicle and Life Insurance.  This was an important move as according to The Insurance Act 1938, advance payment of premium is a must for policies to be active and “live” and a situation got created where premium payment became challenging. 

The pandemic also gave us some harsh lessons to both individuals and MSMEs alike and these are the sections/sectors that are most vulnerable to the economic outage.  For individuals, on account of temporary or permanent job losses, salary getting reduced. For the MSMEs – the impact has been on a wide scale.

Also read: Uberrimae Fides and the moment of truth

Some takeaways

1. For Individuals

• There can be serious financial setbacks if one does not have health insurance.

• Do you know where you have kept the policy copy?

• Even if one has health insurance, whether the cover is adequate in terms of Sum Insured or not.

• If a person has to be hospitalised, are you aware of whom to contact from the Insurance company, what are the procedures, what is payable, and what is not?

• If you don’t have a health Insurance policy, go ahead take one. If you are a single person / young couple – have a policy with a sum insured of at least Rs. 3.00 Lakhs. Anything less has the potential of leaving you with a coverage gap. And for a family of 4, either has (at the bare minimum) a floater policy of Rs. 5.00 Lakhs or a policy that individually covers each of you for at least Rs 3 lakhs.

• If you feel like, have an additional COVID-19 specific policy offered by all the companies. Oriental Insurance offers the most economic cover in this product segment.

• Where parents are approaching the age of 60, it is highly recommended to take a health insurance policy, covering each parent for Rs 5 lakhs.

• Build / Start building a financial cushion, by buying health insurance, that will protect you, your family, and your parents, if there is a need for hospitalisation.

• If you are around 35 to 40 years of age, start planning and building your financial independence that you will need once you cross the age of 60. One thought: Buy a Jeevan Umang policy of LIC that acts as a pension policy without being one. All the proceeds are tax-free.

2. For MSMEs

• Times are challenging but nevertheless invest in your employees. Their wellbeing is your wellbeing. Take a group health insurance policy covering employees – there is also a mandate from the Government of India towards this purpose. Many of you might be under the ambit of ESICs – check if that is providing sufficient cover. If not do take a look at Group Health Insurance.

• Where the business is in the export trade/business, understand and invest in Trade Credit Insurance.  This insurance is also offered to cover sales within India as well.

• Liability Insurance: MSMEs in the IT segment, the chemicals segment should review having Liability Insurance. You can have Product Liability, Public Liability and/or Commercial General Liability cover.

• Spontaneous Combustion:  Businesses that deal with Soya Cakes and similar items that have a propensity to generate heat when stored in heaps, add the optional cover of Spontaneous Combustion to your Fire policy.

• Don’t depend on your Bankers to take your policy. Your property, your hard-earned money is at risk. Bankers will insure for the amount that they have exposure on a loan that they have provided. Ensure that the Sum Insured under the Fire policy represents a fair value of your company’s assets.

• Engage in continual dialogue with your Insurers to see how you can optimise your Insurance policy

These are some of the thoughts that I would like to leave you all with.

At the time of writing, most of Europe has gone into a shutdown mode and travel from the UK is being restricted.  The best insurance for all of us to observe simple safety protocols and stay safe. 

Wishing all my friends Season’s Greetings and a wonderful year of prosperity, success in all that you do!!

Also read: Insurance after Covid-19 lockdown

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